20% reduction in student debt

The reduction is expected to benefit more than 3 million Australians and remove over $16 billion in outstanding debt. The 20% reduction will be automatically applied to anyone with the following student loans:

• HELP loans (eg, HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP, OS-HELP)
• VET Student loans
• Australian Apprenticeship Support Loans
• Student Start-up Loans
• Student Financial Supplement Scheme.

The reduction will be based on the loan balance at 1 June 2025, before indexation was applied. Indexation will only apply to the reduced balance. The ATO will apply the reduction automatically on a retrospective basis and will adjust the indexation that is applied. No action is needed from those with a student loan balance, and the Government has indicated that you will be notified once the reduction has been applied.

If you had a HELP debt showing on your ATO account on 1 April 2025, but you paid the debt off after 1 June 2025, then the reduction will normally trigger a credit to your HELP account. If you don’t have any other outstanding tax or other debts to the Commonwealth, then the credit should be refunded to you.

The HELP debt estimator is a valuable tool for estimating the reduction amount. Please reach out if you need any help in working out eligibility.

Changes to repayments

The Government has also modified the way that HELP and student loan repayments operate, primarily by increasing the amount that individuals can earn before they need to make repayments.

The minimum repayment threshold for the 2025-26 year is being increased from $56,156 to $67,000. The threshold was $54,435 for the 2024-25 year.

Under the new repayment system, an individual will only need to make a compulsory repayment for the 2025-26 year if their income is above $67,000. The repayments will be calculated only against the portion of income that is above $67,000.

Repayments will still be made through the tax system and will typically be determined when tax returns are lodged with the ATO.

For many people, the change in the rules will mean they have more disposable income in the short term, but it will take longer to pay off student loans. The main exception to this will be when an individual chooses to make voluntary repayments.

Extra Repayments

Several clients have asked us if they should make additional repayments against HELP debt, particularly those parents assisting adult children to obtain a home loan. Our view is not to do so at this time, until the reduction has been processed. It appears from the current position that if your HELP debt has been paid off before 1 April 2025, you will have no benefit in relation to the reduction.
If you have any queries or concerns, please get in touch with our Client Care team, and we will be happy to assist.

The reason? A recent Australian Bureau of Statistics (ABS) report found that 46.9% of businesses surveyed used some kind of restraint clause, including for workers in non-executive roles. The survey also found 20.8% of businesses use non-compete clauses for at least some of their staff and 68.2% for more than three-quarters of their employees.

From an economic perspective, declining job mobility impacts wage growth and innovation as restraints prevent access to skilled workers within the economy. Productivity is a key concern, as Australia’s productivity has declined in the last 20 years.

Treasury’s consultation paper Non-compete clauses and other restraints states that, “the direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

A Productivity Commission report estimates that limiting the use of unreasonable restraint of trade clauses will increase workers’ wages by up to 2.4% in industries with high use of non-compete clauses and up to 1.4% in others.

Non-competes: the state of play

Non-compete clauses in Australia are generally enforced under common law. For all regions except New South Wales, restraints are typically presumed to be against the public interest and therefore void and unenforceable except where they are deemed reasonably necessary to protect the legitimate interest of the employer[1].

In NSW, a restraint of trade is valid to the extent that it is not against public policy.

When non-competes are contested, the courts consider the nature and extent of the business interest to be protected (e.g., confidential client information) and whether the scope of restriction the business wants imposed is reasonable, including its geographic area, time period and activities which the restraint seeks to control.

Interests considered ‘legitimate’ by courts include the protection of trade secrets or other confidential information; protection against solicitation of clients with whom the former worker had a personal connection; and protection against key staff being recruited by a former colleague. An employer is not entitled to protect itself against mere competition from a former worker.

What now

The 2025-26 Federal Budget announced the ban on non-compete clauses. The Government has stated that it intends to consult on policy details, including exemptions, penalties, and transition arrangements. Following consultation and the passage of legislation, the reforms are anticipated to take effect from 2027, operating prospectively.

There is a lot of uncertainty at this stage about this measure, despite the enthusiasm of the Treasury economists, not least of which is the impending election.

We’ll bring you more as further information becomes available.

The Enduring Role of Fossil Fuels

Despite global initiatives to transition to renewable energy, fossil fuels—namely coal, oil, and natural gas—continue to dominate global energy production.

In addition, global fossil fuel consumption has continued to rise. In 2023, global primary energy consumption grew by 2%, totalling 620 exajoules (EJ). Fossil fuels contributed 505 EJ, marking a 1.5% increase from the previous year. Oil consumption surpassed 100 million barrels per day for the first time, and fossil fuel demand is expected to reach new record highs in 2025.

Australia’s Need for Economic Diversification

While Australia has made significant commitments to green energy, it must also recognise the limitations of renewables and prioritise economic diversification. A singular focus on renewables risks missing out on more significant opportunities in other sectors, such as:

• Downstream Processing of Resources: – Australia is rich in raw materials like lithium, iron ore, and rare earth elements. Instead of merely exporting these materials, we should invest in refining and manufacturing capabilities to create higher-value products domestically. Exporting steel sheet metal and steel profiles, rather than just iron ore, would significantly enhance Australia’s economic position.
  Labour constraints are the primary reason Australia has not been able to establish sustainable manufacturing industries. However, with the investment in technologies and AI-assisted robotics, Australia is likely to find cost-effective solutions to establish and build more downstream processing capabilities.

• Advanced Manufacturing and Economic Complexity: – According to the Harvard Atlas of Economic Complexity, Australia’s ranking has dropped from 57th in 1995 to 102nd in 2022—placing it just above Ethiopia and below Bangladesh. This decline highlights the urgent need to shift from being a commodity-exporting nation to one that produces and exports more complex goods. Manufacturing nuclear power station fuel rods instead of just exporting yellowcake uranium is one example of how Australia could add value to its exports.
  The only way to achieve this is for Australian Governments (both Federal and State) to promote the use of uranium. The fear of another nuclear disaster has continued to inhibit the use of uranium and nuclear energy usage in Australia.

• Traditional and Emerging Energy Sectors: – Rather than dismissing fossil fuels, Australia should leverage its expertise in energy production while exploring cleaner methods, such as carbon capture and storage (CCS) and natural gas as a transition fuel.

• Technology and Infrastructure Investment: – Investing in infrastructure to support multiple industries—including transportation, logistics, and digital technologies—will strengthen Australia’s economy far more than a single-minded approach to renewables.

A Balanced Approach for a Stronger Future

The reality is that the world will not abandon fossil fuels anytime soon, and Australia must be pragmatic in its economic strategy. While supporting renewable energy development is important, it should not come at the cost of other industries that could secure long-term economic growth. By focusing on downstream processing, advanced manufacturing, and a balanced energy policy, Australia can position itself as a leader in the global economy without placing all its bets on green energy.

Instead of following a one-track agenda, Australia should recognise that true economic and environmental sustainability comes from diversification, innovation, and strategic investment across multiple industries. Strengthening the country’s economic complexity is key to ensuring long-term prosperity and resilience in a rapidly evolving global landscape.

We are here to help

If you’d like to discuss how these changes could impact your financial strategy, feel free to reach out —we’re here to help!

The push for change

The Reserve Bank of Australia (RBA) launched a review in October 2024 of Merchant Card Payment Costs and Surcharging. The review explores whether existing regulatory frameworks are still fit for purpose given the rate of technological change and complexity and if there is a need for greater transparency – surcharges, transaction fees, and how payments are regulated are all up for review. Ultimately, the review is about reducing costs to merchants and consumers.

In general, customers dislike surcharges and would be happy to see them go – they represent a personal loss of value in much the same way a discount is seen as a personal gain. They also have support for a ban from large credit card providers and financial institutions, with the Australian Banking Association’s (ABA) submission to the RBA review saying, “The current surcharging framework is clearly not working and requires targeted reform. Consumers should never be surcharged for bundled costs like POS systems, business software products or other business incentives.” The reference to “business incentives” is where the payment service provider charges a higher fee to provide the merchant with reward points and other incentives.

The push for a ban accelerated when the government announced that it would ban debit card surcharges from 1 January 2026, subject to the outcome of the RBA review later this year.

If surcharges are banned for some or all payment methods, businesses currently charging surcharges must either absorb the cost of merchant fees or increase prices. The issue for many businesses is not whether to charge a fee but the costs of accepting what is now the most common payment method – cash is free to transact, cards are a facility to transact legal tender, not legal tender in and of themselves.

Small business pays 3 times more.

While the average card payment fee in Australia is lower than in the United States (which is close to double Australia’s rates), we pay a higher rate than in some other jurisdictions, such as Europe. The RBA has flagged there might be room to improve this by capping interchange fees and/or introducing competition into how debit card payments are routed (allowing systems to default to the ‘least cost’ option available).

In Australia, it is not a level playing field when it comes to card transaction fees, with a significant disparity between fees paid by small and large merchants – small merchants pay around three times the average per transaction fee than larger merchants (large merchants can secure wholesale fees or utilise ‘strategic’ interchange rates). But even within the small business sector, fees vary dramatically, with the cost of accepting card payments ranging from less than 1% to well over 2% of the transaction value.

How we use cards and digital transactions

The RBA generally favours allowing surcharges, pointing out that they signal to consumers which payment methods offer better value and enable market forces to determine the dominant payment providers. This might be true for large purchases, but do we really notice when tapping our phones or watches to grab that morning coffee?

Cards (including debit, prepaid, credit and charge cards) are Australia’s most frequently used payment method, accounting for three-quarters of all consumer payments in 2022.

According to the Australian Banking Association:

• Contactless payments now account for 95% of in-person card transactions, compared to less than 8% in 2010.
• Online payments, as a share of retail payments, have grown from 7% in 2010 to 18% in 2022.
• Mobile wallet (Apple Pay, Google Pay, etc.) usage has grown from 1% of point-of-sale payments in 2016 to 44% in October 2024.
• Buy Now, Pay Later (BNPL) services, virtually unknown 8 years ago, are now used by nearly a third of Australians.

When are surcharges allowed?

In the days before the RBA’s surcharge standard, it was not uncommon for businesses to apply a flat 3% surcharge.

The surcharge rules enable merchants to surcharge consumers for the “reasonable cost of accepting card payments”.

This means:

• A business can only charge a surcharge for paying by card/digital wallet, but it must not be more than what it costs the business to use that payment type. These costs, measured over a 12-month period, can include gateway costs, terminal costs paid to a provider, fraud prevention, etc. if they relate directly to the card type being surcharged.
  • Payment suppliers must provide merchants with a statement at least every 12 months that includes the business’s average percentage cost of accepting each payment type.
• If a business charges a payment surcharge, it must be able to justify how the surcharge fee was calculated.
• If the surcharge applies to all payment types regardless of type, it must not exceed the lowest surcharge set for a single payment type.
• If there is no way for a customer to pay without incurring a surcharge, the business must include the surcharge in the displayed price. If your customer cannot use cash or another payment method that does not incur a surcharge, then the price displayed must include the surcharge.

The RBA estimates that, on average, card fees cost:

Source: RBA

Excessive surcharging is banned on eftpos, Debit Mastercard, Mastercard Credit, Visa Debit and Visa Credit. The Australian Competition and Consumer Commission (ACCC) reportedly stated that excessive surcharge complaints increased to nearly 2,500 in the 18 months from the start of 2023.

Tax on surcharges

If your business charges goods and services tax (GST) on goods or services, then GST should also apply to any surcharge payments made.

For Australian domestic students, the cost of completing a bachelor’s degree is generally between $20,000 and $45,000, excluding some of the higher-value courses. HECS-HELP loans are available for eligible students to cover the cost of tuition up to $121,844 for most degrees and $174,998 for higher-value degrees like medicine. The average higher education student debt in Australia is around $27,000 and, on average, takes just over 8 years to repay. Nearly 3 million Australians have student loan debts totalling over $81 billion. Over 7 million have loans above $100,000.

Student loans start to be paid back when an individual’s income reaches $54,435. The repayment rate scales according to income, ranging from 0% to 10% when income reaches $159,664.

The Government has announced a series of changes to HECS-HELP, including:

• Indexation rate calculation changes to the lower of consumer price index (CPI) or wage price index (WPI) – currently CPI. Intended to be backdated to student loans on 1 June 2023, effectively removing the 7.1% spike that occurred in 2023.
• Increased minimum repayment threshold to $67,000 in 2025-26. The repayments will also be calculated based on income above the new $67,000 threshold rather than total annual income.
• 20% loan reduction for all study and training support loans before 1 June 2025 (around $16bn).

These changes are subject to the passage of legislation and are not yet law.

If these changes affect you, or you would like advice on managing your student debt, get in touch with us. We are here to help.

Cheques are out, but cash remains king.

While Australians have moved to digital payment methods, the Government has been careful to maintain cash as a payment method.

Around 1.5 million Australians use cash to make more than 80% of their in‑person payments. Cash also provides an easily accessible backup to digital payments in times of natural disaster or digital outage.

According to the most recent data, up to 94% of businesses continue to accept cash.

The Government has stated that they will mandate that businesses must accept cash when selling essential items, with appropriate exemptions for small businesses.

Currently, businesses don’t have to accept cash. They can specify the terms and conditions under which they will supply goods and services.

The issue of card surcharges often arises when a business adds a surcharge rather than recognising this cost of doing business in their pricing. A company can charge a surcharge for paying by card, but the surcharge must not be more than what it costs the business to use that payment type.

Treasurer Jim Chalmers has stated that global uncertainty and rate rises are “smashing the economy”.

In early September, former Treasurer Wayne Swan said that the RBA was “putting economic dogma over rational economic decision making, hammering households, hammering Mums and Dads with higher interest rates, causing a collapse in spending and driving the economy backwards” and that the RBA was, “simply punching itself in the face.”

Australian mortgage holders and renters have yet to receive relief from interest rates following 13 successive rises to the official cash rate since May 2022.

The Reserve Bank’s position and the flow-through effects

The Reserve Bank of Australia (RBA) Board opted to maintain the official cash rates at 4.35% at its September Board meeting. The rationale is that inflation remains persistently high and has been for the last 11 quarters. The consumer price index (CPI) rose 3.9% over the year to the June quarter and remains above the RBA’s target range of 2-3%.

But, it is not persistently high inflation that is causing the politicians to weigh in. RBA Governor Michele Bullock has warned that “it is premature to be thinking about rate cuts” and that “the Board does not expect that it will be in a position to cut rates in the near term.”

The Australian Bureau of Statistics (ABS) June Quarter National Accounts paint a bleak picture of the Australian economy. Per capita GDP fell for the sixth consecutive quarter by -0.4% to -1.5%, the longest consecutive period of extended weakness ever recorded.

Household spending weakest since COVID-19 Delta

Household spending fell by -0.2% in the quarter, the weakest growth rate since the Delta-variant lockdown affected September quarter 2021.

Discretionary spending – travel and hospitality impacted most

The ABS says we spent less on discretionary items (-1.1%), particularly for events and travel. Unsurprisingly, spending on hotels, cafes, and restaurants was down 1.5%. Spending on food also fell -0.1% as households looked to reduce grocery bills.

Household savings lowest since 2006

The savings ratio remains low. Households saved only 0.9% of their income over the year. This was the lowest rate of annual saving since 2006-07. Net savings reduce when household income grows slower than household spending.

The unemployment rate

According to seasonally adjusted data released by the Australian Bureau of Statistics (ABS), the unemployment rate held steady at 4.1 per cent in September, in line with the revised figure for August but below analysts’ estimates. The economy added 64,100 jobs last month, significantly more than the 25,000 economists expected.

While this is good news, it would likely push the time out for Australia’s first rate cut since COVID.

The RBA has two more board meetings this year – Melbourne Cup day and December – before its first meeting in February next year.

Economic growth from Government spending

The Australian economy did grow by 0.2%, the eleventh consecutive quarter of growth, but the growth rate was unimpressive. The ABS says that “the weak growth reflects subdued household demand, which detracted 0.1 percentage points from GDP growth while government consumption contributed 0.3 percentage points, the same contribution to growth as the previous quarter.”

Government spending increased by 1.4% over the quarter. Commonwealth social assistance benefits to households led the rise, with continued strength in expenditure on national programs providing health services. State and local government expenditures also rose with increased employee expenses across most states and territories.

The RBA’s position on interest rates

The RBA is on a narrow path. It’s trying to bring inflation back to target within a reasonable timeframe while preserving the gains in the labour market over the last few years. The RBA expects to reach this target range by the end of 2025.

Through 2022 and 2023, most components of the CPI basket were growing faster than usual (the CPI is literally a basket of 87 types of expenditure across 11 groups, such as household spending, education, and transport). Over the last 18 months, the price of goods has come down as supply disruptions like COVID-19 and the war in Ukraine have eased, and it is now growing close to the historical average.

The fundamental problem areas are housing costs and services. In housing, the growth is from increased construction costs and substantial rent increases. For services, while discretionary spending is down, as we can see from the June National Accounts, inflation in this category remains high at 5.3% for the June quarter. Wage increases and lower productivity, combined with the increased costs of doing business (electricity, insurance, logistics, rent, etc.), are all impacting.

The RBA is eager to underscore the human toll of inflation. It’s the most vulnerable in our community who bear the brunt. Lower income households, who tend to allocate more of their spending towards essentials like food, utility bills, and rent, are hit hardest. In contrast, higher income households, who spend more on owner-occupied housing and discretionary items, are less affected.

Cost-of-living pressures have hit younger and lower income households particularly hard. These groups, already facing financial challenges, are feeling the squeeze of inflation more than most.

An Australian Bureau of Statistics (ABS) survey found that 46.9% of businesses surveyed used some form of restraint clause, including for workers in non-executive roles. The survey also found that 20.8% of businesses use non-compete clauses for at least some of their staff and 68.2% for more than three-quarters of their employees.

Over the last 30 years, Australia has seen a decline in job mobility. Australia is not alone in this; other advanced economies have experienced the same issue. While restraint clauses are not the only factor contributing to the decline—an ageing population and a rise in post-pandemic market concentration in some industries have also contributed—it is specifically the role of restraints that is the focus of the Competition Review issues paper.

From an economic perspective, declining job mobility impacts wage growth and innovation as restraints prevent access to skilled workers within the economy. Productivity is a key concern as Australia’s productivity has declined in the last 20 years.

The review states, “The direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.”

For businesses, however, this is the point—restricting the knowledge developed by a worker during their employment from benefiting a competitor, limiting the likelihood of a ‘mass exodus’ of key workers from the business to a competitor, preventing clients from employing key workers and protecting the value of the business by preventing employees from walking away with customers that were hard won, at a cost, by the business.

However, the impact of restraints appears to be a psychological deterrent, given that most are not contested. Of the 115 matters relating to restraints of trade between 2020 and 2023 dealt with by Legal Aid NSW, only one business commenced proceedings in court against a former worker. A further study indicates that where employers seek legal redress in the courts, they are more likely than not to fail.

The international trend is to either ban restraints for workers under a certain income level and time limit restraints for higher paid workers or to limit the duration of restraints generally but specify a level of compensation to the worker for the restraint period.

We can help

If you have any concerns about your workers and your business, then Contact us today